Ukraine shows need for fracking in Europe, U.K. Minister says

5/6/2014

Ukraine shows need for fracking in Europe, U.K. Minister says

BRADLEY OLSON

HOUSTON (Bloomberg) -- The Ukraine crisis has become a “wake-up call” for European governments on the need to develop local energy resources, including natural gas from shale, UK Energy Minister Michael Fallon said.

The use of hydraulic fracturing to tap shale reserves that could meet demand for decades would provide greater security of supply at a time when Russia has threatened to curb gas shipments needed to power European economies, he said in an interview in Houston.

“We have to ensure that we do maximize our indigenous resources,” Fallon said. “We can’t be reliant on dodgy parts of the world.”

Escalating violence in Ukraine fanned by Russian separatists has intensified calls to develop local prospects, especially in countries such as Bulgaria that are more reliant on Russian gas, he said. Russia provides about a third of the EU’s oil and gas needs, mainly via state-controlled Gazprom and Rosneft through pipelines that cross Ukraine.

Russia must stop making threats that it will cut off gas shipments to Ukraine for mounting debts until violence within the country stops, Fallon said. Further dialogue is needed to avert supply limits and bolster the Ukraine economy, he said.

“I hope it can be avoided,” Fallon said. “First, the violence needs to cease. Russia needs to pull back from threats of that kind.”

Bulgaria and France have banned fracing because of environmental concerns, while the governments of Poland and the UK are encouraging the production method. Prime Minister David Cameron’s Conservative-led government lifted a fracing moratorium in December 2012 and put in place some of the world’s richest exploration tax breaks.

Plans by about 12 companies to drill 20 to 40 shale wells in the next two years in the UK are proceeding as scheduled and the industry should be capable of meeting its target, Fallon said.

Britain sits above the Bowland-Hodder formation, a belt of shale that stretches across the center of the country that may hold more than 1,300 Tcf of natural gas, according to estimates from the British Geological Survey.